I welcome the Minister of State and his officials.
Motor Vehicle (Duties and Licences) Bill 2013: Committee Stage
I apologise for my late arrival but I had been told the meeting was to commence at 2.15 p.m.
Sections 1 and 2 agreed to.
SECTION 3
I move amendment No. 1:
In page 3, between lines 17 and 18, to insert the following:
“Amendment of section 1 of Act of 1952
3. Section 1 of the Act of 1952 is amended in paragraph (b) of subsection (2) (amended by section 3 of the Motor Vehicle (Duties and Licences) Act 2008) by substituting “€119” for “€99”.”.
The purpose of this amendment, which inserts a new section 3 in the Bill is to provide a technical change to raise the annual tax threshold above which owners of certain categories of vehicles can obtain a half-yearly or quarterly disk. Under current legislation, those categories of vehicles with an annual tax of €99 or less pay tax on an annual basis only. The amendment aims to ensure that existing conditions of availability of concessionary rates of motor tax are retained for some of the vehicles within this category which were taxed at €95 or less prior to budget 2013 but where the tax was raised to €102 following the budget increase. The vehicles concerned are agricultural tractors, island vehicles, trench diggers, excavators, motor caravans, hearses, dumpers and fork lift trucks. In order to ensure that existing provisions are maintained for those vehicles, this amendment increases the threshold to €119. This sum will ensure that no new vehicle types are brought within the provisions. The new lowest €120 annual tax for electric vehicles, which can be taxed half-yearly and quarterly, would be the next lowest annual tax, while maintaining the status quo for existing categories. The amendment does no more than continue the current arrangements for these categories of vehicles where a concessionary rate of tax applies.
My party's amendment was ruled out of order on the basis that it was not Revenue-friendly, that is, that there were cost implications involved. However, if the criteria for acceptance of amendments is that there be no cost implications, then we would never have any amendment accepted. It is wrong that the amendment was ruled out of order on that basis. For future reference, is the guideline that all amendments must be fully costed before being submitted? In other words, if one submits an amendment and does not explain how the additional cost will be met, one's amendment will be ruled out of order. Are we going to face this constantly, with amendments being ruled out of order? I am seeking an explanation.
I thank the Deputy but we have not actually reached the aforementioned amendment.
I know that.
Would the Minister of State like to respond to Deputy Ellis?
It is not a matter for my Department. Amendments being ruled out of order is a matter for the Houses of the Oireachtas, as I understand it.
Is it common?
It is not the Department that makes such rulings. An amendment either meets the criteria laid down by the Houses of the Oireachtas or it does not. If an amendment involves a potential charge on the people, it must be ruled out of order. It is not a decision for the Department to make.
I shall read the response received regarding amendment No. 2, in the name of Deputy Brian Stanley. It states:
Amendment No. 2 in the name of Deputy Brian Stanley proposes to delete the requirement for vehicles to be registered on or after 1 July 2008 or to have been brought into use during or after 2008 in order to be taxed based on CO2 emissions levels. Although this will provide relief for a large number of motor vehicle owners, it will also impose a charge on certain categories of motor vehicles where a higher duty is payable due to higher CO2 emissions.
I have read the response and heard what the Minister of State has just said. It is not the Minister of State or the Department that has ruled the amendment out of order. In 2008 people were sold the idea that if they bought cars with low CO2 emissions they would pay lower motor tax. It seems very unfair that my party's amendment has been ruled out of order because people were sold a pup.
We are not allowed to discuss this now. I am being very lenient with the Deputy.
I acknowledge that but I feel very strongly that people have-----
In the context of the rules of the House, the amendment cannot be allowed. However, the Deputy can make the points he wishes to make to the relevant section of the Bill. The Deputy is not being prevented from speaking on the issue.
I am not opposing the Government's amendment but I am opposing the section. The whole idea in 2008 was to change the culture whereby people who bought more fuel-efficient cars were rewarded through the tax code.
The other aspect of this to which I wish to draw attention is the issue of the motor tax fund. Last week when we were debating this issue, the Minister for the Environment, Community and Local Government said that most of the motor tax fund is ring-fenced for local authorities. However, he also said that €150 million would be taken out of that fund this year to pay down some of our national debt.
This is not about motor tax at all. This issue is a major source of complaint from the public. People are paying into a fund. The motor tax rates are being increased but the public does not see a return for its money. For example, there is a competition to located the biggest pothole in the country. There is a practice of labelling taxation, such as the carbon tax, for example, yet this tax goes into the general fund. Similarly, this tax is being called a motor tax but it will go towards paying off the national debt. Another example is the property tax which is not really a property tax because in many cases it is a tax on a debt as the householder is still paying for the house.
I note a dangerous development. We are ruining the prospect of people changing the type of vehicles they buy. When they see that their roads are deteriorating, yet they are paying more tax it is no surprise that there is resistance and it is an understandable resistance. The Government needs to take that on board in its taxation policy because if there is not compliance, the whole system fails.
I note that Deputies are opposed to the increases that took effect from 1 January 2013. I recognise that any increase in tax is unwelcome, this being the second increase in as many years. However, it is an unavoidable fact that the new CO2-based system introduced in July 2008, has resulted over time in a decline in motor tax receipts. This means it has worked. Instead of the switch being revenue-neutral while also providing an environmental incentive for use of the more fuel-efficient cars, the tax was structured in such a way that in the absence of budget increases the effect is that by the time the switch to CO2 taxation is completed in the next decade and a half, the tax base will have shrunk by 50%.
Since 2008 there has been a year-on-year reduction in motor tax income related to the changeover to CO2 taxation. Income went from a high level of €1.060 billion in 2008 to €1 billion, approximately, in 2011. There was an increase to €1.05 billion in 2012, due to the increases in motor tax rates announced in the budget for 2012. In the absence of that increase, it is estimated that the income would have been in the order of €954 million, a reduction of 5.5%, over the 2011 income. In the absence of further rebalancing measures, the downward trend will continue as the proportion of vehicles taxed on CO2 increases as an overall proportion of the car fleet and as technologies mandated by the EU requirements lead to a greater proportion of cars being even more efficient.
This year for the first time, the majority of new registrations are in the lowest tax band. In the absence of increases in motor tax, the bulk of which goes to the Local Government Fund, and supports the general funding of the local government system, as well as the roads and public transport system, the Deputy may be aware that other forms of financing of local government would have to be found.
The increase in motor tax this year amounts to €86.5 million, which is a significant sum to make up in the current financial circumstances. The Government and the Minister for the Environment, Community and Local Government, Deputy Hogan, have encouraged the local authorities to exercise restraint in the setting of commercial rates and where possible, to reduce them. This is one of the measures provided for in the action plan for jobs. The other sources of funding for local authorities from 2014 will be the local property tax. The Deputy must recognise that cutting motor tax would place inevitable pressure on locally-elected members to increase the take from the local property tax within the 15% discretion.
Ensuring sustainable funding for local authorities is a priority for this Government. Cutting one important source of funding, as the Deputy proposes, would damage our efforts to restructure the financial base for local authorities. We do not propose to accept the relevant amendment to that effect.
The Minister of State referred in his reply to the local government fund. Since 2009, a total of €534 million has been withdrawn from the local government fund when €150 million coming out of the motor tax fund this year, is included. The property tax will bring in €500 million at best. Therefore, we will not see an increase in the services. There needs to be a relationship between what people pay for and what they get in return. Last week, the Minister, Deputy Hogan, stated that €150 million was being taken out of the motor tax fund to pay the national debt. That is not why people pay motor tax. Call it general taxation and take it from general taxation but do not call it motor tax if it is not motor tax. It is not motor tax; this increase in the rate is a contribution towards the national debt. Let us be honest with people.
The Deputy has made her point.
I have a few questions for the Minister of State. He said that just under €1 billion was collected in 2012. How is that distributed per county using the equalisation mechanism? Is there a way of estimating the distribution? Apart from the contribution towards repayment of the national debt, I ask the Minister of State to provide a breakdown on how the moneys are distributed. Ideally we would all prefer to see this money going to fund local government. How is this money distributed to local authorities?
I will ask the Department to provide the Deputy with that information.
That would be helpful. What moneys are provided to local authorities for the upkeep of roads? I ask for a breakdown of the distribution of the funding as to what is provided for dealing with potholes, for example. It seems that the rates are more favourable to new cars than older cars with the same emissions. This does not seem right. I ask the Minister of State to clarify the situation. A car should be judged on its emissions, the engine capacity and the value of the vehicle. The whole system should be overhauled on the basis of emissions, considering that the revenue from the motor tax is decreasing. I think we have gone in the wrong direction. We were led to believe that the rates would be set against emission levels over a period of time.
A maximum of €150 million from the fund will go to central taxation. It does not necessarily mean that all that amount will be taken. The Deputy is correct in his point about emissions. The legislation will provide transparency. Everybody has the right to comment on it and to question it.
In regard to what Deputy Ellis said, what he is asking for is a county by county breakdown-----
Yes.
-----of how much is collected and what the equalisation figures are for each county. I will ask that the Department to provide the Deputy with that information.
It was Deputy Stanley.
Apologies, Deputy Stanley. I can read the response provided to the amendment. The need and resource model was developed in 2000 to assist in the determination of the allocation of general purpose grants to local authorities. The aim of the model is to bring about equalisation between local authorities over time so that each will have sufficient resources from a combination of central grants and local income to provide for a reasonable level of service. The model was first used to assist in determining a portion of the allocations for the local government fund in 2000 and was used after that each year until 2007.
The amount provided for equalisation amounted to €18 million in 2004, €12 million in 2005, €17 million in 2006 and €16 million in 2007. The amounts each year are consolidated into each local authority's baseline allocation for successive years, thus ensuring that progress is being made on a gradual basis to move local authorities towards a position of greater equity. Equalisation and general purpose allocations since 2008 are based on the pattern of equalisation established by that model. Local authorities had previously provided detailed annual returns and this action was very time consuming. This approach to equalisation from 2008 and subsequently was used to release key staff to work in other areas.
In 2012, 99% of the available general purpose grant was allocated on the basis of the adjustment to the baseline. The Minister, Deputy Hogan, allocated the balance of funding towards those authorities with acute financial positions, as evidenced from their annual financial statements or engagement with the Department, and in relation to costs associated with the provision of environmental infrastructure.
Equalisation remains a core principle and it will apply for 2012. While all local authority revenue sources are under pressure, we are reflecting the need to ensure that local authorities have the resources to provide a reasonable level of service. The Minister, Deputy Hogan, remains committed to the principle of equalisation. In the current difficult financial environment it is critical that the Government ensures as far as is possible that all citizens can expect a reasonable level of service provision from the local authority regardless of where they live.
Is the amendment proposing the amendment of section 1 of the Act of 1952 agreed?
It is not agreed.
Amendment put and declared carried.
Amendment No. 2 not moved.
Section 3, as amended, agreed to.
Sections 4 and 5 agreed to.
SECTION 6
Amendment No. 3 proposes an amendment of section 6 of the Local Government Act 1998, while amendment No. 4 relates to the Title. It is proposed that amendments Nos. 3 and 4 may be discussed together by agreement.
I move amendment No. 3:
In page 12, between lines 18 and 19, to insert the following:
"Amendment of section 6 of Local Government Act 1998
6. Section 6 (amended by section 6 of the Act of 2012) of the Local Government Act 1998is amended—
(a) by substituting the following subsection for subsection (2C):
"(2C) (a) Subject to paragraphs (b) and (c), the Minister may, on or before 31 December 2013, pursuant to a request from the Minister for Finance, make one, or more than one, payment out of the Fund in the amount requested by the Minister for Finance.
(b) When making a payment under paragraph (a), the Minister shall have regard to—
(i) the amount then standing to the credit of the Fund,
(ii) the payments due to be made in respect of expenses incurred or to be incurred by one or more local authorities in performing its or their functions generally, and
(iii) the payments due to be made under subsection (2A) (amended by section 44 of the Environment (Miscellaneous Provisions) Act 2011).
(c) The total amount of all payments made under paragraph (a) shall not exceed €150 million.",
and
(b) by deleting subsections (2D), (2E), (2F) and (2G).".
Amendment No. 3 inserts a new section 7. It is to provide for the transfer from the Local Government Fund to the Exchequer during 2013 as a necessary measure towards the reduction of the national debt. An amendment to the Local Government Act 1998 is necessary to allow for the legislative underpinning of the transfer. The amendment provides that in determining the payment, regard must had to the balance in the balance in the fund when all commitments have been made. The transfer is in respect of 2013 only. In 2012, €46.5 million of motor tax income was transferred from the local government fund to the Exchequer. This year an amount of up to €150 million is to be similarly transferred.
It should be noted that the projected income to the Local Government Fund for motor tax in 2013 is in excess of €1.1 billion. This is a balanced approach to meet both the needs of local authorities through the local government fund and to ensure that all sectors and sections of society make an appropriate contribution to tackling the financial situation in which we find ourselves.
I should stress that the Government is committed to supporting the Local Government Fund and it will retain the bulk of the income from motor tax to be used to fund local services. I understand there will be approximately €950 million in the fund after this income is transferred. Apologies, the balance will be in the order of €960 million even if the maximum of €150 million is transferred.
Does the Minister of State wish to comment on amendment No. 4 to the Title?
This amendment proposes to amend the Long Title to provide for the insertion of the words "to amend the Local Government Act 1998".
I wonder why we did not get notice in advance of the inclusion of a new section 7 as outlined by the Minister of State. We should have been alerted to the fact that it is proposed that money will be transferred from the fund to pay off the national debt. That seems to go against the idea of what we are doing in the Bill and why we are raising revenue, which is to provide for local authority services and the maintenance of roads and networks. What is proposed seems wrong. I do not believe that many people understand that this is happening. I certainly do not agree with this money being used to pay off the national debt. There are other ways to do that. I just felt I needed to say that.
Section 6 was included in the legislation last year. Obviously it is being done in a transparent way in that the Minister of State is telling us that he is hijacking this money from the Local Government Fund. This proposed amendment is not about motor tax revenue, rather it is about that revenue with part of it being used to pay off the national debt. That is the reality of it. I want to be as transparent as possible about that and I find the approach taken objectionable.
The reason there will be more income in the fund is that there is an increase in the amount of motor tax that people are being asked to pay. There is a considerable number of older cars in the national fleet. With the distance many people live from where they work, they have the added burden of coping with the expense of the cost of commuting to and from work. They have to pay road tax to have a vehicle on the road but rather than paying road tax they are paying a more general tax. I wish to press the point that this is unfair. The Title of the Bill, Motor Vehicle (Duties and Licences) Bill 2013 should also include a reference to the national debt if we were to honest about what the Bill is about.
I wish to return to a point the Minister of State made in response to the needs and resources model. That model is fundamentally flawed in that the baseline when it was taken counted the needs of local authorities, which were varied. For example, counties with communities that developed from the time of that baseline do not have new unmet needs included in that calculation. There are wide variations in the staffing arrangements in local authorities. For example, in County Meath there has been an increase in the population of approximately 40,000. There are more people living in County Meath than there are in County Kerry but the number of staff in the local authority in Kerry is double the number in the local authority in Meath. The need there would be greater because there is a staff complement that will have to be paid. New facilities and services for growing populations are not included in that model and it is fundamentally unfair. There is a double unfairness in this respect in some parts of the country because of the way that the needs and resources model is calculated.
I do not know if the Minister of State heard Dr. Prionnsias Breathnach from NUIM interviewed on the "Morning Ireland" this morning; he spoke about the potential distribution of the property tax, the equalisation model and the types of difficulties that will be posed.
This has not been considered in the context of the needs and resources model and I believe there will be serious problems with it. I object to section 6. The Title is not correct and I wish to put on record that I will oppose both.
First, in regard to what Deputy Ellis stated, it was announced in the Dáil on the night of the budget that this would happen. I appreciate that-----
It is not clear in the documents. That is what I meant.
In terms of transparency and accountability it is clear what is going to happen. We are accountable for it as we are accountable here today, listening to everything Deputies have to say. It is like buying a house. When the Government came to office the foundations of the house were rotten and the house could not stand. The nation could not stand. The finances of this country were in an appalling and shameful mess. When the country was in hock the receivers came in and we have to deal with that issue, which is what we are doing now. Obviously, we will not satisfy everybody by what we do and I accept that. However, this is the only way we can deal with the financial situation. As I pointed out earlier, we are dealing with this on a year-to-year basis. In other words, what happened last year and what is happening this year are counted within a 12-month period. If we were not doing this how would we address the deficit in our budget, by which we spend €1 billion more per month than we take in? That is the problem we have. We must try to balance all of that and make difficult decisions. Some have been made and some are yet to be made, as in this instance. I accept this is a difficult decision but that is the reason for it. It is being made transparent and has been accounted for previously.
There is a very important link between local authorities and the Minister and the Department, which continues. Notwithstanding all the moneys that come in, €960 million will definitely be spent on and given to local authorities. A maximum of up to €150 million - last year the figure was €46.5 million - will go to the Exchequer. That has happened because we had no choice. It was what we had to do, what we did and what we are doing this year.
The Minister of State referred to having no choice. Politics is all about choices, those the Government decides to make. The Minister of State has come to the conclusion there is no other choice but I believe there is a different range of choices.
It is about choices but ultimately we have gone down this road. The ordinary people who have to pay these taxes are seeing a hike of almost 20%, and in some cases, much more. Cars were to cost less but some have now increased in price by up to 30%, which is a massive increase. The Government is trying to justify that to the people when it is going to take €150 million from what is collected, which should go directly for local provision. There are major problems in councils and local authorities. It is not merely a case of the choices local authorities have to make, whether this or that pothole will not be fixed. That is the other choice we have here. I do not for one minute underestimate the problem in our economy but I believe there are other ways of raising these funds.
A final response from the Minister of State.
I acknowledge the arguments that were made but we must proceed. I accept the integrity of the Deputies' position and I believe they accept ours in making these decisions. Although they may disagree profoundly with them we believe this action must be taken. That is why it is in the legislation.
TITLE
Amendment put and declared carried.
Section 6, as amended, agreed to.
I move amendment No. 4:
In page 3, line 7, after “thereunder;” to insert “to amend the Local Government Act 1998;”.
Amendment agreed to.
Question proposed: "That the Title, as amended, be the Title to the Bill."
Is the Title agreed?
No. It is very deceptive. If money is to be taken out to fund something else there should be an explanation in the Bill that makes this clear.
We have discussed this already.
I accept that. However, I put on record that I will oppose this measure on a later Stage.
Question put and agreed to.
Bill reported with amendments.
I thank the Minister of State, Deputy Fergus O'Dowd, Mr. Enright and Ms Gleeson for attending today and I wish them and the members a pleasant, peaceful and safe St. Patrick's weekend.